Historically, businesses have depended on on-premise Enterprise Resource Planning (ERP) systems to consolidate and organize information. While these solutions did help businesses run better initially, there are several areas where they fall short, especially around cost, agility and maintenance. Many of the challenges that arise with on-premise ERP systems are resolved with enterprise cloud software such as cloud-based ERP systems.
Transitioning to the Cloud
Globally, business leaders are shifting to the cloud at an exponential rate. With more organizations accepting cloud ERPs as the new normal, switching to a cloud-based solution can help your company become nimbler and growth-oriented – especially in these times when virtual offices and remote work are becoming more common. By providing scalable, flexible, and cost-effective technology, cloud ERP systems offer several advantages over their on-site equivalents.
Advantages of Cloud Computing
Before we explore cloud ERP systems in detail, let us look at cloud computing itself. Cloud computing is a substantial change from how IT resources have traditionally been considered in organizations. The cloud has evolved from a technological curiosity to a critical component of upgrading the IT environment and enabling the digital transformation of both large and small businesses.
Platforms for cloud computing and storage provide numerous advantages over traditional on-premise systems, including cheaper operational expenses and improved compatibility with the working style of digital businesses.
Some common reasons why firms are turning to cloud computing services are as follows:
- Lower Cost: Cloud computing lowers the upfront expenditures of hardware and software, as well as the costs of setting up and running on-site data centers, which include server racks, round-the-clock electricity and cooling, and IT experts to manage the infrastructure. In general, the cost associated with cloud ERP is lower.
- Greater Flexibility: One of the benefits of cloud computing services is their ability to scale flexibly. In cloud terms, this entails supplying the right quantity of IT resources—for example, more or less processing power, storage, and bandwidth—at the correct time and from the appropriate geographic location.
- Improved Performance: The most popular cloud computing services are hosted on a global network of secure data centers that are updated with the latest generation of fast and efficient computing hardware on a regular basis. Compared to a single corporate data-centre, this has several advantages, including lower application network latency and greater economies of scale. If you need more computing power for better performance, it can be easily achieved by buying more computing power on the cloud.
- Enhanced Security: Many cloud providers offer a comprehensive set of policies, technologies, and controls to assist you in improving your overall security posture and securing your data, apps, and infrastructure. This is especially beneficial for small companies as small companies can’t invest huge amounts for data security. Also, the firm can safely conduct its business without hiring additional people for data security.
- Higher Productivity: Racking and stacking—hardware configuration, software patching, and other time-consuming IT management tasks—are typical in on-site datacentres. Because of cloud computing, many of these duties are no longer necessary, allowing IT personnel to focus on more critical business goals. Thus, the productivity of in-house IT staff can be used on more important tasks and thus increase the productivity of the employees.
- High Reliability: Cloud computing can replicate data to multiple locations on the cloud provider’s network, making data backup, disaster recovery, and business continuity easier and cheaper. Even if the data fails at a particular location, it can be restored from a different location, thus ensuring the safety of your data.
On-Premise ERP vs Cloud ERP
An on-premise ERP is a system of maintenance of ERP infrastructure on the premise of the firm or at a data center owned by the firm. Whenever you require more computing power or bandwidth, you can buy mainframe computers and add them to your existing infrastructure. The advantage is that you are in complete control of your data, and you don’t need to pay any external vendor. On the other hand, users can access their ERP software through the internet with a cloud ERP solution. Instead of being housed on-premises, the ERP software and tools are delivered and managed on the cloud.
10 Reasons for Companies of all sizes to Migrate to the Cloud from on-premise
Many firms, especially small and medium-sized ones, benefit from cloud ERP solutions because they lower the cost of ownership, remove barriers to greater functionality, enable corporate agility, improve data security, and reduce IT dependency. Let’s take a closer look at the primary advantages.
1 – Cut IT Spending
Saving money on IT infrastructure is one of the most common reasons for companies to go to the cloud. Rather than anticipating capacity requirements in advance, businesses may make modifications on the go, get rid of obsolete assets and effortlessly right-size cloud-based resources based on specific demands.
Cloud-based ERP systems also have lower implementation costs than on-premise ERP systems because no hardware is required. This makes it a feasible alternative for small and medium-sized organizations, as most cloud-based ERP systems are available on a subscription basis and can be implemented quickly with no downtime.
2 – Boost Business Agility
Business flexibility is critical in today’s global economy. To stay ahead of the competition and keep up with constantly changing industry dynamics, organizations need access to flexible, on-demand IT resources. And over 99 percent of what they require is available in the cloud, on-demand. Hardware and installation components no longer take weeks or months to be delivered; instead, businesses can lease capabilities directly from cloud providers, allowing them to go to market much more quickly.
3 – Improve Security
A report by Mcafee revealed that cybercrime and cybersecurity combined cost the global economy a total of $1 Trillion in 2020. Clearly, the increased prevalence and impact of attacks have shone the spotlight on cybersecurity in the last few years. No company can afford to let its guard down in this regard, since the consequences can be devastating. For example, IBM pegged the cost of a data breach in 2021 at $4.24 Million.
Data security is a key concern these days, and cloud-based ERP vendors such as SAP have built-in security precautions to keep your information safe. Despite the common misconception that having an on-premise ERP provides more security because it is ‘in-house’, avoiding cloud services may expose companies to unnecessary security risks as they continue to rely on outdated or poorly managed in-house systems with more vulnerabilities than the public cloud equivalent.
Cloud-based ERP vendors can provide enterprise-grade security and compliance, considerably above what a company can supply internally. By moving to the cloud, businesses can improve their IT infrastructure and protect their programs from hacking efforts.
4 – Get Rid of End-of-Life Worries
Efficient usage of on-premise ERP infrastructure requires long-term planning and calculations. End-of-life deadlines for essential hardware and software solutions can influence many decisions, with long-term contracts and restrictive license agreements adding to the muddle. In today’s time, when startups can become unicorns in a year, enterprises simply do not want to be restricted by such concerns.
With a cloud ERP, organizations can pay as they go for key capabilities and benefit from upgrades as they become available, eliminating the need to worry about contract terms or application life cycles.
5 – Increase efficiency
With a cloud ERP, businesses no longer need to run their own on-premise data centers. Thus, migrating to a cloud-based ERP can have a significant influence on the IT department of a firm. Because on-premise ERPs are time-consuming to maintain, internal IT personnel have limited time to develop and oversee strategic IT infrastructure. Running an ERP from the cloud, on the other hand, usually involves less time and effort. The IT team will have fewer day-to-day maintenance activities to worry about as more technical responsibilities are taken up by the software vendor.
6 – Leverage Hassle-free Maintenance
Businesses don’t have to worry about ERP software upgrades or upkeep because the vendor hosts and maintains the system infrastructure. The vendor also maintains the database, servers, and other infrastructure and distributes new updates or patches to all clients automatically, ensuring that the software is secure and compliant with all applicable rules and regulations. Any difficulties that arise are handled by these vendors, who frequently provide 24/7 support as a subscription-based service.
7 – Make Use of New Technologies
Moving to the cloud opens up a slew of new opportunities for using new cloud-native technologies. With AI, machine learning, sophisticated analytics, and other business intelligence capabilities already integrated into the service, cloud ERP enables a faster and more cost-effective option to make use of these. These can help firms create more accurate projections, uncover hidden insights, improve operations, and build game-changing new services, without incurring significant costs.
8 – Deploy in Lesser Time
Cloud deployments are often faster than on-premise counterparts. For example, an on-premise implementation could take three months, whereas a SaaS application of similar complexity and breadth would just take two weeks. This saves downtime when the transfer is completed and allows firms to respond quickly to changing market conditions or meet expanding demand. It also enables the company to focus on core operations and leave ERP-related concerns to the cloud vendor, especially in the initial stages.
9 – Leverage Easier Customization
Since everything has to be done in-house by the enterprise, configuring an on-premise system to match unique business objectives is more expensive and involves a bigger commitment of time and resources. This includes putting together the correct mix of ERP features and third-party apps, as well as making necessary software and hardware upgrades. All of this is exacerbated by the fact that many businesses lack an IT workforce with experience in designing enterprise resource solutions.
Customizing cloud ERP solutions, on the other hand, is a simpler and less expensive procedure because customizations are performed by the vendor. There are no additional hardware or software costs, and no ERP experience is required. Thus, businesses can easily develop a solution that fits their specific needs at a low price.
10 – Enable Easier Collaboration
Collaboration over the cloud is one of the main benefits of moving to the cloud. It allows different employees to collaborate simultaneously, across different geographies.
Another key benefit of cloud collaboration is version control. Users can work on the same document at the same time, with all changes saved and documented automatically. This reduces the need for separate copies and leaves a virtual trail that is easily accessible at all times.
All of these advantages add up to firms being able to create more value with few resources by migrating ERP to the cloud. However, the smoothest path to the cloud is one that is tailored to your company’s specific needs, goals, and technological plan. You choose the pace and decide which aspects of your company should be tackled first.
For this, you need to select a vendor with a reputation for managing cloud infrastructure contracts across different industries and geographies. SAP is the largest and most well-known cloud portfolio supplier in the ERP industry, with millions of cloud users and over 100 solutions covering all business activities.
SAP makes data processing and information exchange more efficient across enterprises. In the areas of AI-powered analytics, intelligent process automation, and easier data integration, SAP ERP outperforms competitors. SAP is ideally positioned to employ smart technologies to help you alter your mission-critical operations and rapidly react to change – no matter the size of your organization – with a worldwide customer support network that spans 34 languages and 64 countries.